§ 105-163.010: Repealed
pursuant to former G.S. 105-163.015(d), effective for investments made on
or after January 1, 2014.

§ 105-163.011: Repealed
pursuant to former G.S. 105-163.015(d), effective for investments made on
or after January 1, 2014.

§ 105-163.012: Repealed
pursuant to former G.S. 105-163.015(d), effective for investments made on
or after January 1, 2014.

§ 105-163.013: Repealed
pursuant to former G.S. 105-163.015(d), effective for investments made on
or after January 1, 2014.

§ 105-163.014: Repealed
pursuant to former G.S. 105-163.015(d), effective for investments made on
or after January 1, 2014.

§ 105-163.015: Repealed
pursuant to former G.S. 105-163.015(d), effective for investments made on
or after January 1, 2014.

Article 4A.

Withholding; Estimated Income Tax for Individuals.

§ 105-163.1. Definitions.

The following definitions apply in this Article:

(1) Compensation. - Consideration a payer pays a payee.

(2) Repealed by Session Laws 2009-476, s. 1, effective
for taxable years beginning on or after January 1, 2010.

(3) Repealed by Session Laws 2014-3, s. 14.4(a),
effective for taxable years beginning on or after January 1, 2014.

(4) Employee. - An individual, whether a resident or a
nonresident of this State, who performs services in this State for wages or an
individual who is a resident of this State and performs services outside this
State for wages. The term includes an ordained or licensed member of the clergy
who elects to be considered an employee under G.S. 105-163.1A, an officer
of a corporation, and an elected public official.

(5) Employer. - A person for whom an individual
performs services for wages. In applying the requirements to withhold income
taxes from wages and pay the withheld taxes, the term includes a person who:

a. Controls the payment of wages to an individual for
services performed for another.

b. Pays wages on behalf of a person who is not engaged
in trade or business in this State.

c. Pays wages on behalf of a unit of government that
is not located in this State.

d. Pays wages for any other reason.

(6) Individual. - Defined in G.S. 105-153.3.

(6a) Individual Taxpayer Identification Number (ITIN). - A
taxpayer identification number issued by the Internal Revenue Service to an
individual who is required to have a U.S. taxpayer identification number but
who does not have, or is not eligible to obtain, a Social Security number (SSN)
from the Social Security Administration.

(6b) ITIN contractor. - An ITIN holder who performs
services in this State for compensation other than wages.

(6c) ITIN holder. - A person whose taxpayer
identification number is an Individual Taxpayer Identification Number (ITIN),
including applied for and expired numbers.

a. A nonresident individual who performs in this State
for compensation other than wages any personal services in connection with a
performance, an entertainment, an athletic event, a speech, or the creation of
a film, radio, or television program.

b. A nonresident entity that provides for the
performance in this State for compensation of any personal services in
connection with a performance, an entertainment, an athletic event, a speech,
or the creation of a film, radio, or television program.

(8) Nonresident entity. - Any of the following:

a. A foreign limited liability company, defined using
the same definition for the term "foreign LLC" in G.S. 57D-1-03,
that has not obtained a certificate of authority from the Secretary of State
pursuant to Article 7 of Chapter 57D of the General Statutes.

b. A foreign limited partnership as defined in G.S. 59-102
or a general partnership formed under the laws of any jurisdiction other than
this State, unless the partnership maintains a permanent place of business in
this State.

c. A foreign corporation, as defined in G.S. 55-1-40,
that has not obtained a certificate of authority from the Secretary of State
pursuant to Article 15 of Chapter 55 of the General Statutes.

(9) Pass-through entity. - Defined in G.S. 105-228.90.

(9a) Payee. - Any of the following:

a. A nonresident contractor.

b. An ITIN contractor.

c. A person who performs services in this State for
compensation that fails to provide the payer a taxpayer identification number.

d. A person who performs services in this State for
compensation that fails to provide the payer a valid taxpayer identification number.
The Secretary must notify a payer that a taxpayer identification number is not
valid.

(10) Payer. - A person who, in the course of a trade or
business, pays compensation.

(11) Payroll period. - A period for which an employer
ordinarily pays wages to an employee of the employer.

(11a) Pension payer. - A payor or a plan administrator with
respect to a pension payment under section 3405 of the Code.

(11b) Pension payment. - A periodic payment or a
nonperiodic distribution as those terms are defined in section 3405 of the
Code.

(12) Taxable year. - Defined in section 441(b) of the
Code.

(12a) Taxpayer Identification Number (TIN). - An
identification number issued by the Social Security Administration or the
Internal Revenue Service excluding Taxpayer Identification Number for Pending
U.S. Adoptions (ATIN) and Preparer Taxpayer Identification Number (PTIN).

(13) Wages. - The term has the same meaning as in section
3401 of the Code, except the term does not include amounts paid to a
nonresident employee for a business, trade, profession, or occupation carried
on in this State to perform disaster-related work during a disaster response
period at the request of a critical infrastructure company. The definitions and
provisions of G.S. 166A-19.70A apply to this subdivision.

§ 105-163.1A. Ordained or
licensed clergyman may elect to be considered an employee.

An ordained or licensed clergyman who performs services for a
church of any religious denomination may file an election with the Secretary
and the church he serves to be considered an employee of the church instead of
self-employed. Until a clergyman files an election, amounts paid by a church
to a clergyman are not subject to withholding. A church shall withhold taxes
from a clergyman's wages after the clergyman files an election with it under
this section. (1985, c. 394, s. 2;
1985 (Reg. Sess., 1986), c. 826, s. 9; 1989 (Reg. Sess., 1990), c. 945, s. 6.)

§ 105-163.2. Employers must withhold taxes.

(a) Withholding Required. - An employer shall deduct
and withhold from the wages of each employee the State income taxes payable by
the employee on the wages. For each payroll period, the employer shall withhold
from the employee's wages an amount that would approximate the employee's
income tax liability under Article 4 of this Chapter if the employer withheld
the same amount from the employee's wages for each similar payroll period in a
calendar year. In calculating an employee's anticipated income tax liability,
the employer shall allow for the additions that employee is required to make
under Article 4 of this Chapter and the deductions, and credits to which the
employee is entitled under Article 4 of this Chapter. The amount of State
income taxes withheld by an employer is held in trust for the Secretary.

(b) Withholding Tables. - The manner of withholding
and the amount to be withheld shall be determined in accordance with tables and
rules adopted by the Secretary. The withholding of wages pursuant to and in
accordance with these tables shall be deemed as a matter of law to constitute
compliance with the provisions of subsection (a) of this section,
notwithstanding any other provisions of this Article. The Secretary shall
promulgate tables for computing amounts to be withheld with respect to
different rates of wages for different payroll periods applicable to the
various combinations of allowances to which an employee may be entitled and
taking into account the appropriate standard deduction. The tables may provide
for the same amount to be withheld within reasonable salary brackets or ranges
so designed as to result in the withholding during a year of approximately the
amount of an employee's indicated income tax liability for that year.

The withholding allowances provided by these tables and rules
shall, as nearly as possible, approximate the amount of the employee's
indicated income tax liability for that year based upon all of the following
factors:

(1) An income tax rate equal to the rate set in G.S.
105-153.7 plus one-tenth of one percent (0.1%).

(2) The additions the employee is required to make
under Article 4 of this Chapter.

(3) The deductions and credits to which an employee is
entitled under Article 4 of this Chapter.

(c) Withholding if No Payroll Period. - If wages are
paid with respect to a period that is not a payroll period, the amount to be
deducted and withheld shall be that applicable in the case of a miscellaneous
payroll period containing a number of days, excluding Sundays and holidays,
equal to the number of days in the period with respect to which such wages are
paid. In any case in which wages are paid by an employer without regard to any
payroll period or other period, the amount to be deducted and withheld shall be
that applicable in the case of a miscellaneous payroll period containing a
number of days equal to the number of days, excluding Sundays and holidays,
which have elapsed since the date of the last payment of such wages by such
employer during the calendar year, or the date of commencement of employment
with such employer during such year, or January 1 of such year, whichever is
the later.

(d) Estimated Withholding. - The Secretary may, by
rule, authorize employers to estimate the wages to be paid to an employee
during a calendar quarter, calculate the amount to be withheld for each period
based on the estimated wages, and, upon payment of wages to the employee,
adjust the withholding so that the amount actually withheld is the amount that
would be required to be withheld if the employee's payroll period were
quarterly.

(e) (Effective for taxable years beginning before
January 1, 2016) Alternatives to Tables. - If the Secretary determines that
use of the withholding tables would be impractical, would impose an
unreasonable burden on an employer, or would produce substantially incorrect
results, the Secretary may authorize or require an employer to use some other
method of determining the amounts to be withheld under this Article. The
alternative method authorized by the Secretary must reasonably approximate the
predicted income tax liability of the affected employees. In addition, with the
agreement of the employer and employee, the Secretary may authorize an employer
to use an alternative method that results in withholding of a greater amount
than otherwise required under this section.

The Secretary's authorization of an alternative method is
discretionary and may be cancelled at any time without advance notice if the
Secretary finds that the method is being abused or is not resulting in the
withholding of an amount reasonably approximating the predicted income tax
liability of the affected employees. The Secretary shall give an employer
written notice of any cancellation and the findings upon which the cancellation
is based. The cancellation becomes effective upon the employer's receipt of
this notice or on the third day after the notice was mailed to the employer,
whichever occurs first. If the employer requests a hearing on the cancellation
within 30 days after the cancellation, the Secretary shall grant a hearing.
After a hearing, the Secretary's findings are conclusive.

(e) (Effective for taxable years beginning on or
after January 1, 2016) Alternatives to Tables. - If the Secretary
determines that use of the withholding tables would be impractical, would
impose an unreasonable burden on an employer, or would produce substantially
incorrect results, the Secretary may authorize or require an employer to use
some other method of determining the amounts to be withheld under this Article.
The alternative method authorized by the Secretary must reasonably approximate
the predicted income tax liability of the affected employees based upon the
factors provided in subsection (b) of this section. In addition, with the
agreement of the employer and employee, the Secretary may authorize an employer
to use an alternative method that results in withholding of a greater amount
than otherwise required under this section.

The Secretary's authorization of an alternative method is
discretionary and may be cancelled at any time without advance notice if the
Secretary finds that the method is being abused or is not resulting in the
withholding of an amount reasonably approximating the predicted income tax
liability of the affected employees. The Secretary shall give an employer
written notice of any cancellation and the findings upon which the cancellation
is based. The cancellation becomes effective upon the employer's receipt of
this notice or on the third day after the notice was mailed to the employer,
whichever occurs first. If the employer requests a hearing on the cancellation
within 30 days after the cancellation, the Secretary shall grant a hearing.
After a hearing, the Secretary's findings are conclusive. (1959, c. 1259, s. 1; 1973, c. 476, s. 193; 1981, c. 13;
1989, c. 728, s. 1.41; 1989 (Reg. Sess., 1990), c. 945, s. 7; 1997-109, s. 2;
2014-3, s. 14.5(a); 2015-241, s. 32.16A(a).)

§ 105-163.2A. Pension payers must withhold taxes.

(a) Definitions. - The definitions provided in section
3405 of the Code apply in this section.

(b) Withholding Required. - A pension payer required
to withhold federal taxes under section 3405 of the Code on a pension payment
to a resident of this State must deduct and withhold from the payment the State
income taxes payable on the payment. Liability for withholding and paying taxes
under this section on a pension payment falls on the person who would be liable
under section 3405 of the Code for withholding federal taxes on the payment.

Except as otherwise provided in this section, the provisions
of this Article apply to a pension payer's pension payment to a resident of
this State as if it were an employer's payment of wages to an employee. The
pension payer must file a return, pay the withheld taxes, and report the amount
withheld in the time and manner required under G.S. 105-163.6 and G.S. 105-163.7
as if the pension payment were wages. If a pension payer has more than one
arrangement under which it may make pension payments to a resident of this
State, each arrangement must be treated separately under this section.

(c) Amount. - In the case of a periodic payment, the
pension payer must withhold the amount that would be required to be withheld
under this Article if the payment were a payment of wages by an employer to an
employee for the appropriate payroll period.

In the case of a nonperiodic distribution, the pension payer
must withhold taxes equal to four percent (4%) of the nonperiodic distribution.

(d) Election of No Withholding. - The recipient may
elect not to have taxes withheld under this section to the extent permitted by
section 3405 of the Code. The election must be in the form required by the Secretary.
In the case of periodic payments, the election remains in effect until revoked
by the recipient. In the case of a nonperiodic distribution, the election
applies on a distribution-by-distribution basis unless it meets conditions
prescribed by the Secretary for it to apply to subsequent nonperiodic
distributions by the pension payer.

A pension payer must notify each recipient of the right to
elect not to have taxes withheld under this section. The notice must comply
with the requirements of section 3405 of the Code and any additional
requirements prescribed by the Secretary.

A recipient's election not to have taxes withheld under this
section is void if the recipient fails to furnish the recipient's tax
identification number to the pension payer, or the Secretary has notified the
pension payer that the tax identification number furnished by the recipient is
incorrect.

(e) Exemptions. - This section does not apply to the
following pension payments:

(1) A pension payment that is wages under this Article.

(2) Any portion of a pension payment that meets both of
the following conditions:

a. It is not a distribution or payment from an
individual retirement plan as defined in section 7701 of the Code.

b. The pension payer reasonably believes it is not
taxable to the recipient under Article 4 of this Chapter.

(3) A distribution described in section 404(k)(2) of
the Code, relating to dividends on corporate securities.

(4) A pension payment that consists only of securities
of the recipient's employer corporation plus cash not in excess of two hundred
dollars ($200.00) in lieu of securities of the employer corporation. (1999-414, s. 3; 2000-126, s. 3; 2014-3, s. 14.6(a); 2015-259,
s. 7.1(c).)

§ 105-163.2B. North Carolina State Lottery Commission must
withhold taxes.

The North Carolina State Lottery Commission, established by
Chapter 18C of the General Statutes, must deduct and withhold State income
taxes from the payment of winnings in an amount of six hundred dollars
($600.00) or more. The amount of taxes to be withheld is a percentage of the
winnings. The percentage is the individual income tax rate in G.S. 105-153.7.
The Commission must file a return, pay the withheld taxes, and report the
amount withheld in the time and manner required under G.S. 105-163.6 and G.S.
105-163.7 as if the winnings were wages. The taxes the Commission withholds are
held in trust for the Secretary. (2005-276, s.
31.1(bb); 2005-344, s. 10.2(a); 2006-259, s. 8(f); 2006-264, s. 91(b); 2013-316,
s. 1.3(g); 2015-259, s. 7.1(d).)

§ 105-163.3. Certain payers must withhold taxes.

(a) Requirement. - Every payer who pays more than one
thousand five hundred dollars ($1,500) during a calendar year to a payee must
deduct and withhold from compensation paid to the payee the State income taxes
payable by the payee on the compensation as provided in this section. The
amount of taxes to be withheld is four percent (4%) of the compensation paid to
the payee. The taxes a payer withholds are held in trust for the Secretary.

(b) Exemptions. - The withholding requirement does not
apply to the following:

(1) Compensation that is subject to the withholding
requirement of G.S. 105-163.2.

(2) Compensation paid to an ordained or licensed member
of the clergy.

(3) Compensation paid to an entity exempt from tax
under G.S. 105-130.11.

(4) Compensation paid to an alien, as described by 8
U.S.C. § 1101(a)(15)(H)(ii)(a), that is not subject to federal income tax
withholding under section 1441 of the Code.

(5) Compensation paid by a nonresident business or a critical
infrastructure company to an ITIN contractor who is a nonresident individual
for a business, trade, profession, or occupation carried on in this State to
perform disaster-related work during a disaster response period at the request
of a critical infrastructure company. The definitions and provisions of G.S. 166A-19.70A
apply to this subdivision.

(c) Repealed by Session Laws 2015-259, s. 7.1(e),
effective for taxable years beginning on or after January 1, 2015.

(d) Returns, Annual Statement, and Report. - A payer
required to deduct and withhold from a payee's compensation under this section
must file a return, pay the withheld taxes, and report the amount withheld in
the time and manner required under G.S. 105-163.6 and G.S. 105-163.7
as if the compensation were wages.

(e) Records. - This subsection applies to a payer who
pays compensation for personal services performed in connection with a
performance, an entertainment, an athletic event, a speech, or the creation of
a film, radio, or television program. If a payer does not withhold from
payments to a nonresident entity because the entity is exempt from tax under G.S. 105-130.11,
the payer must obtain from the entity documentation proving its exemption from
tax. If a payer does not withhold from payments to a nonresident corporation or
a nonresident limited liability company because the entity has obtained a
certificate of authority from the Secretary of State, the payer must obtain
from the entity its corporate identification number issued by the Secretary of
State. If a payer does not withhold from payments to an individual because the
individual is a resident, the payer must obtain the individual's address and
social security number. If a payer does not withhold from a partnership because
the partnership has a permanent place of business in this State, the payer must
obtain the partnership's address and taxpayer identification number. The payer
must retain this information with its records.

(f) Payer May Repay Amounts Withheld Improperly. - A
payer may refund to a person any amount the payer withheld improperly from the
person under this section, if the refund is made before the end of the calendar
year and before the payer furnishes the person the annual statement required by
subsection (d) of this section. An amount is withheld improperly if it is
withheld from a payment to a person who is not a payee, if it is withheld from
a payment that is not compensation, or if it is in excess of the amount
required to be withheld under this section. A payer who makes a refund under
this section must take the following actions:

(1) Not report the amount refunded on the annual
statement required by subsection (d) of this section.

A nonresident withholding agent's act in compliance with this
Article does not in itself constitute evidence that the nonresident is doing
business in this State. (1959, c. 1259, s. 1; 1989
(Reg. Sess., 1990), c. 945, s. 9; 1997-109, s. 2.)

§ 105-163.5. Employee withholding allowances; certificates.

(a) An employee receiving wages is entitled to the
withholding allowances that would result in the employer withholding
approximately the employee's income tax liability under Article 4 of this Chapter.

(b) Every employee shall, at the time of commencing
employment, furnish his or her employer with a signed withholding allowance
certificate informing the employer of the allowances the employee claims. If
the employee fails to file the allowance certificate, the employer must compute
the amount to be withheld from the employee's wages as if the employee were a
single individual with no allowances.

(c) Withholding allowance certificates shall take
effect as of the beginning of the first payroll period that ends on or after
the date on which the certificate is furnished, or if payment of wages is made
without regard to a payroll period, then the certificate shall take effect as
of the beginning of the miscellaneous payroll period for which the first payment
of wages is made on or after the date on which the certificate is furnished.

(d) If, on any day during the calendar year, the amount
of withholding allowances to which the employee is entitled is less than the
amount of withholding allowances claimed by the employee on the withholding
allowance certificate then in effect with respect to the employee, the employee
shall, within 10 days thereafter, furnish the employer with a new withholding
allowance certificate stating the amount of withholding allowances which the
employee then claims, which shall in no event exceed the amount to which the
employee is entitled on that day. If, on any day during the calendar year, the
amount of withholding allowances to which the employee is entitled is greater
than the amount of withholding allowances claimed, the employee may furnish the
employer with a new withholding allowance certificate stating the amount of
withholding allowances that the employee then claims, which shall not exceed
the amount to which the employee is entitled on that day.

(e) Withholding allowance certificates must be in the
form and contain the information required by the Secretary.

(f) In addition to any criminal penalty provided by
law, if an individual furnishes his or her employer an allowance certificate
that contains information that has no reasonable basis and that results in a
lesser amount of tax being withheld under this Article than would have been
withheld if the individual had furnished reasonable information, the individual
is subject to a penalty of fifty percent (50%) of the amount not properly
withheld. (1959, c. 1259, s. 1; 1973, c. 476, s. 193;
1981 (Reg. Sess., 1982), c. 1277; 1989, c. 728, s. 1.43; 1997-109, s. 2; 2014-3,
s. 14.5(b).)

§ 105-163.6. When employer must file returns and pay
withheld taxes.

(a) General. - A return is due quarterly or monthly as
specified in this section. A return shall be filed with the Secretary in the
manner required by the Secretary, shall report any payments of withheld taxes
made during the period covered by the return, and shall contain any other
information required by the Secretary.

Withheld taxes are payable quarterly, monthly, or semiweekly,
as specified in this section. If the Secretary finds that collection of the
amount of taxes this Article requires an employer to withhold is in jeopardy,
the Secretary may require the employer to file a return or pay withheld taxes
at a time other than that specified in this section.

(b) Quarterly. - An employer who withholds an average
of less than two hundred fifty dollars ($250.00) of State income taxes from
wages each month must file a return and pay the withheld taxes on a quarterly
basis. A quarterly return covers a calendar quarter and is due by the last day
of the month following the end of the quarter.

(c) Monthly. - An employer who withholds an average of
at least two hundred fifty dollars ($250.00) but less than two thousand dollars
($2,000) from wages each month must file a return and pay the withheld taxes on
a monthly basis. A return for the months of January through November is due by
the 15th day of the month following the end of the month covered by the return.
A return for the month of December is due the following January 31.

(d) Semiweekly. - An employer who withholds an average
of at least two thousand dollars ($2,000) of State income taxes from wages each
month shall file a return by the date set under the Code for filing a return
for federal employment taxes attributable to the same wages and shall pay the
withheld State taxes by the date set under the Code for depositing or paying
federal employment taxes attributable to the same wages. The date set by the
Code for depositing or paying federal employment taxes shall be determined
without regard to § 6302(g) of the Code.

An extension of time granted to file a return for federal
employment taxes attributable to wages is an automatic extension of time for
filing a return for State income taxes withheld from the same wages, and an
extension of time granted to pay federal employment taxes attributable to wages
is an automatic extension of time for paying State income taxes withheld from
the same wages. An employer who pays withheld State income taxes under this
subsection is not subject to interest on or penalties for a shortfall in the
amount due if the employer would not be subject to a failure-to-deposit penalty
had the shortfall occurred in a deposit of federal employment taxes
attributable to the same wages and the employer pays the shortfall by the date
the employer would have to deposit a shortfall in the federal employment taxes.

If the amount of taxes an employer is required to withhold
and pay under the Code is changed or corrected, the provisions of G.S. 105-159
apply to employers, pension payers, and every other payer required to withhold
taxes under this Article. Failure of an employer to comply with this section
does not, however, affect an individual's right to a credit under G.S. 105-163.10.
(1993 (Reg. Sess., 1994), c. 582, s. 4; 2007-491, s.
17; 2018-5, s. 38.3(d).)

§ 105-163.7. Statement to employees; information to
Secretary.

(a) Report to Employee. - Every employer required to
deduct and withhold from an employee's wages under G.S. 105-163.2 shall
furnish to the employee in respect to the remuneration paid by the employer to
such employee during the calendar year, on or before January 31 of the
succeeding year, or, if the employment is terminated before the close of the
calendar year, within 30 days after the date on which the last payment of
remuneration is made, duplicate copies of a written statement showing the
following:

(1) The employer's name, address, and taxpayer
identification number.

(2) The employee's name, address, and social security
number.

(3) The total amount of wages or remuneration made.

(4) The total amount deducted and withheld under G.S. 105-163.2.

(b) Informational Return to Secretary. - Every
employer shall annually file an informational return with the Secretary that
contains the information given on each of the employer's written statements to
an employee. The Secretary may require additional information to be included on
the informational return, provided the Secretary has given a minimum of 90
days' notice of the additional information required. The informational return
is due on or before January 31 of the succeeding year and must be filed in an
electronic format as prescribed by the Secretary. If the employer terminates
its business or permanently ceases paying wages during the calendar year, the
informational return must be filed within 30 days of the last payment of
remuneration. The informational return required by this subsection is in lieu
of the report required by G.S. 105-154.

An employer that is not doing business in this State because
it is a nonresident business performing disaster-related work during a disaster
response period at the request of a critical infrastructure company is not
required to file an information return with the Secretary. However, the
employer must furnish to an employee, upon request, any information necessary
for that person to properly file a State income tax return. The definitions and
provisions in G.S. 166A-19.70A apply to this paragraph.

(d) Deduction Disallowance. - The Secretary may request
a person who fails to timely file statements of payment to another person with
respect to wages, dividends, rents, or interest paid to that person to file the
statements by a certain date. If the payer fails to file the statements by that
date, and, in addition to any applicable penalty under G.S. 105-236, the
amounts claimed on the payer's income tax return as deductions for salaries and
wages or rents or interest shall be disallowed to the extent that the payer
failed to comply with the Secretary's request with respect to the statements. (1959, c. 1259, s. 1; 1973, c. 476, s. 193; 1989 (Reg.
Sess., 1990), c. 945, s. 11; 1993 (Reg. Sess., 1994), c. 679, s. 8.3; 1997-109,
s. 2; 2002-72, s. 16; 2015-259, s. 7.1(a); 2018-5, s. 38.10(n); 2019-187, s.
1(n).)

§ 105-163.8. Liability of withholding agents.

(a) A withholding agent who withholds the proper
amount of income taxes under this Article and pays the withheld amount to the
Secretary is not liable to any person for the amount paid. A withholding agent
who fails to withhold the proper amount of income taxes or pay the amount
withheld to the Secretary is liable for the amount of tax not withheld or not
paid. A withholding agent who fails to withhold the amount of income taxes
required by this Article or who fails to pay withheld taxes by the due date for
paying the taxes is subject to the penalties provided in Article 9 of this
Chapter.

A withholding agent who pays the Secretary more under this
Article than the Article requires the agent to pay may obtain a refund of the
overpayment by filing a request for a refund with the Secretary. No refund is
allowed, however, if the withholding agent withheld the amount of the
overpayment from the wages or compensation of the agent's employees or
contractors. A withholding agent must file a request for a refund within the
time period set in G.S. 105-241.6. Interest accrues on a refund as provided in
G.S. 105-241.21. (1959, c. 1259, s. 1; 1973, c. 476,
s. 193; 1975, c. 74, s. 1; 1981 (Reg. Sess., 1982), c. 1223, s. 3; 1989 (Reg.
Sess., 1990), c. 945, s. 13; 1997-109, s. 2; 2007-491, s. 18; 2008-187, s. 15.)

The amount deducted and withheld under this Article during
any calendar year from the wages or compensation of an individual shall be
allowed as a credit to that individual against the tax imposed by Article 4 of
this Chapter for taxable years beginning in that calendar year. The amount
deducted and withheld under this Article during any calendar year from the
compensation of a nonresident entity shall be allowed as a credit to that
entity against the tax imposed by Article 4 of this Chapter for taxable years
beginning in that calendar year. If the nonresident entity is a pass-through
entity, the entity shall pass through and allocate to each owner the owner's
share of the credit.

If more than one taxable year begins in the calendar year
during which the withholding occurred, the amount shall be allowed as a credit
against the tax for the last taxable year so beginning. To obtain the credit
allowed in this section, the individual or nonresident entity must file with
the Secretary one copy of the withholding statement required by G.S. 105-163.3
or G.S. 105-163.7 and any other information the Secretary requires. (1959, c. 1259, s. 1; 1967, c. 1110, s. 4; 1973, c. 476, s.
193; 1989, c. 728, s. 1.44; 1991 (Reg. Sess., 1992), c. 930, s. 9; 1997-109, s.
2.)

(a) In the case of any underpayment of the estimated
tax by an individual, the Secretary shall assess interest in an amount
determined by applying the applicable annual rate established under G.S. 105-241.21
to the amount of the underpayment for the period of the underpayment.

(b) For purposes of subsection (a), the amount of the
underpayment shall be the excess of the required installment, over the amount,
if any, of the installment paid on or before the due date for the installment.
The period of the underpayment shall run from the due date for the installment
to whichever of the following dates is the earlier: (i) the fifteenth day of
the fourth month following the close of the taxable year, or (ii) with respect
to any portion of the underpayment, the date on which such portion is paid. A
payment of estimated tax shall be credited against unpaid required installments
in the order in which such installments are required to be paid.

(c) For purposes of this section there shall be four
required installments for each taxable year with the time for payment of the
installments as follows:

(1) First installment - April 15 of taxable year;

(2) Second installment - June 15 of taxable year;

(3) Third installment - September 15 of taxable year;
and

(4) Fourth installment - January 15 of following
taxable year.

(d) Except as provided in subsection (e), the amount of
any required installment shall be twenty-five percent (25%) of the required
annual payment. The term "required annual payment" means the lesser
of:

(1) Ninety percent (90%) of the tax shown on the return
for the taxable year, or, if no return is filed, ninety percent (90%) of the
tax for that year; or

(2) One hundred percent (100%) of the tax shown on the
return of the individual for the preceding taxable year, if the preceding
taxable year was a taxable year of 12 months and the individual filed a return
for that year.

(e) In the case of any required installment, if the
individual establishes that the annualized income installment is less than the
amount determined under subsection (d), the amount of the required installment
shall be the annualized income installment, and any reduction in a required
installment resulting from the application of this subsection shall be
recaptured by increasing the amount of the next required installment determined
under subsection (d) by the amount of the reduction and by increasing
subsequent required installments to the extent that the reduction has not
previously been recaptured.

In the case of any required installment, the annualized
income installment is the excess, if any, of (i) an amount equal to the
applicable percentage of the tax for the taxable year computed by placing on an
annualized basis the taxable income for months in the taxable year ending
before the due date for the installment, over (ii) the aggregate amount of any
prior required installments for the taxable year. The taxable income shall be
placed on an annualized basis under rules prescribed by the Secretary. The
applicable percentages for the required installments are as follows:

(1) First installment - twenty-two and one-half percent
(22.5%);

(2) Second installment - forty-five percent (45%);

(3) Third installment - sixty-seven and one-half
percent (67.5%); and

(4) Fourth installment - ninety percent (90%).

(f) No interest shall be imposed under subsection (a)
if the tax shown on the return for the taxable year reduced by the tax withheld
under this Article is less than the amount set in section 6654(e) of the Code
or if the individual did not have any liability for tax under Part 2 of Article
4 for the preceding taxable year.

(g) For purposes of this section, the term
"tax" means the tax imposed by Part 2 of Article 4 minus the credits
against the tax allowed by this Chapter other than the credit allowed by this
Article. The amount of the credit allowed under this Article for withheld
income tax for the taxable year is considered a payment of estimated tax, and
an equal part of that amount is considered to have been paid on each due date
of the taxable year, unless the taxpayer establishes the dates on which all
amounts were actually withheld, in which case the amounts so withheld are
considered payments of estimated tax on the dates on which the amounts were
actually withheld.

(h) If, on or before January 31 of the following
taxable year, the taxpayer files a return for the taxable year and pays in full
the amount computed on the return as payable, no interest shall be imposed
under subsection (a) with respect to any underpayment of the fourth required installment
for the taxable year.

(i) Notwithstanding subsections (c), (d), (e), and
(h) of this section, an individual who is a farmer or fisherman for a taxable
year is subject to the provisions of this subsection.

(1) One installment. - The individual is required to
make only one installment payment of tax for that taxable year. This
installment is due on or before January 15 of the following taxable year. The
amount of the installment payment must be the lesser of:

a. Sixty-six and two-thirds percent (66 2/3%) of the
tax shown on the return for the taxable year, or, if no return is filed, sixty-six
and two-thirds percent (66 2/3%) of the tax for that year; or

b. One hundred percent (100%) of the tax shown on the
return of the individual for the preceding taxable year, if the preceding
taxable year was a taxable year of 12 months and the individual filed a return
for that year.

(2) Exception. - If, on or before March 1 of the
following taxable year, the taxpayer files a return for the taxable year and
pays in full the amount computed on the return as payable, no interest is
imposed under subsection (a) of this section with respect to any underpayment
of the required installment for the taxable year.

(3) Eligibility. - An individual is a farmer or
fisherman for any taxable year if the individual's gross income from farming or
fishing, including oyster farming, for the taxable year is at least sixty-six
and two-thirds percent (66 2/3%) of the total gross income from all sources for
the taxable year, or the individual's gross income from farming or fishing,
including oyster farming, shown on the return of the individual for the
preceding taxable year is at least sixty-six and two-thirds percent (66 2/3%)
of the total gross income from all sources shown on the return.

(j) In applying this section to a taxable year
beginning on any date other than January 1, there shall be substituted, for the
months specified in this section, the months that correspond thereto. This
section shall be applied to taxable years of less than 12 months in accordance
with rules prescribed by the Secretary.

The Secretary may, with the approval of the Attorney General,
enter into agreements with the taxing authorities of states having income tax
withholding statutes that govern the amounts to be withheld from the wages and
salaries of residents of the other state or states under the provisions of this
Article when the other state or states grant similar treatment to the residents
of this State. The agreements may provide for recognition of the anticipated
tax credits allowed under the provisions of G.S. 105-153.9 in determining the
amounts to be withheld. (1959, c. 1259, s. 1; 1973,
c. 476, s. 193; 1997-109, s. 2; 2014-3, s. 14.28.)

§ 105-163.23. Withholding from federal employees.

The Secretary is designated as the proper official to make
request for and enter into agreements with the Secretary of the Treasury of the
United States to provide for the compliance with this Article by the head of
each department or agency of the United States in withholding of State income
taxes from wages of federal employees and paying the same to this State. The
Secretary is authorized, empowered, and directed to request and enter into
these agreements. (1959, c. 1259, s. 1; 1973, c. 476,
s. 193; 1997-109, s. 2.)

§ 105-163.24. Construction of Article.

This Article shall be liberally construed in pari materia
with Article 4 of this Chapter to the end that taxes levied by Article 4 shall
be collected with respect to wages and compensation by withholding agents'
withholding of the appropriate amounts and by individuals' payments in
installments of income tax with respect to income not subject to withholding. (1959, c. 1259, s. 1; 1997-109, s. 2.)